German bunds nearly flat ahead of January employment report, Eurozone CPI

The German bunds traded nearly flat Tuesday as investors wait to watch the country’s employment report for the month of January scheduled to be released on January 31 by 08:55GMT and eurozone’s consumer price inflation for the same period by 10:00GMT.

The German 10-year bond yields, which move inversely to its price, slipped 1 basis point to 0.68 percent, the yield on 30-year note traded flat at 1.34 percent and the yield on short-term 2-year too hovered around -0.53 percent by 09:55GMT.

Ahead of tomorrow’s flash euro area inflation figures for January, the preliminary German numbers will also be released later today. We expect German CPI on the EU measure to remain unchanged at 1.6 percent y/y, although the risks to this estimate appear to be skewed to the downside given the weaker-than-expected figure from Saxony just released. Not least due to an expected steep drop in Spain, however, we forecast that the euro area figure to decline from 1.4 percent y/y to 1.2 percent y/y.

Also out today is the European Commission’s latest economic sentiment survey. With the preliminary consumer sentiment index having increased from 0.5 to 1.3, the highest since 2000, the headline economic sentiment index is expected to have inched higher to 116.1 this month, likewise the highest since the start of the millennium. If the PMIs are a reliable guide, business confidence should remain highly elevated, with an improved reading for services offsetting a slight moderation in the industrial sector from the series high registered at the end of last year.

Meanwhile, the German DAX slipped 0.16 percent to 13,304.50 by 09:55 GMT, while at 09:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at -8.20 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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